When Preparing a Statement of Cash Flows Using the Indirect

question 179

Multiple Choice

When preparing a statement of cash flows using the indirect method, which of the following is correct?

• A) The declaration of a cash dividend should be a use of cash in the financing activities section.
• B) The issuance of a stock dividend should be a use of cash in the financing activities section.
• C) The purchase of land and a building by issuing a long-term note payable should be a source of cash in the financing activities section.
• D) Proceeds from the sale of equipment should be added to net income in the operating activities section.
• E) A loss on the sale of land should be added to net income in the operating activities section.

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Definitions:

Implied Warranty of Merchantability

An implicit guarantee that a product will meet a minimum level of quality and functionality as expected for goods of its kind.

Implied Warranty of Fitness

An assurance, not explicitly stated, that a product will meet a buyer's needs for a particular purpose.

Express Warranty

An explicit promise made by a seller regarding the quality, condition, or performance of the goods being sold.

New England Seafood Chowder

A traditional creamy soup from the New England region made with seafood like clams and fish, potatoes, onions, and celery.